Business development manager, Toru Matsui, said it marked another step in their strategy of targetting lower risk countries for exploration opportunities. Recently Novus sold off their Egyptian and Pakistani acreage and made serious investments into the US onshore Gulf area.

Under terms of the deal, Novus can earn a 50% interest in both ATP-613P and ATP-674P in Maryborough Basin in Queensland by funding the drilling of up to two wells in ATP 613P. Magellan Petroleum will remain operator of the joint venture.

Initial drilling targets will centre around the Gregory River gas discovery well in the 1960's according to Matsui, and will employ an underbalanced, air drilling approach.

"Exploration is the best way to add value for shareholders," he said.

Novus said a decline in oil prices was largely responsible for a lower September quarter sales result compared to the previous quarter's performance. It told the market that sales in the September quarter was around $45 million, down by 7% on the June quarter result of $48 million.

However, reflecting its current gas-based strategy, Novus said gas production during the quarter increased by 3.6% to 6.220 million cubic feet compared to 5.7 million cubic feet in the June quarter.

Analysts believe Novus' investment in Texas is beginning to pay dividends with both the La Playa and Tomato wells contributing to revenue. The two wells are flowing at a combined rate of 3.5 million cubic feet a day, close to the high-priced US markets.

Managing director Bob Williams said the completion of drilling operations at West Bird in the US could see Novus selling gas from these wells prior to the high demand and strong prices brought on by the northern winter.